Quick march! Military men storm the telecoms sector

Iran's Mohammad Ali Jafari: Guardian of the Revolution... and telecoms tycoon?

Last week, Nugon Sovan of the Phnom Penh Post reported that the Cambodian Government is set to list three state-owned companies on the country's planned stock exchange. The three enterprises for which IPO preparations are underway are the Phnom Penh Water Supply Authority, Sihanoukville Autonomous Port and Telecom Cambodia, the country's incumbent fixed-line operator. Attracting investment to the latter company is certainly a pressing matter if the Hun Sen Government is serious about improving what I understand to be very underdeveloped wireline infrastructure.

The southeast Asian country has certainly enjoyed something of a cellular boom, with mobile penetration currently standing at 34.23%, according to WCIS. This is up from 23.54% in September 2008 and 14.86% a year before that. In contrast, fixed-line services have not been developed with anything like as much enthusiasm. The 2008 country profile from industry watchers Buddecomm has this to say: "fixed-line services [have] flattened out at around 42,000 [lines] with no sign of any revival in interest in this segment of the market." The report also contends that Internet penetration has remained particularly low, one of the biggest inhibitors to Internet growth in the country being the high cost of online access in comparison to other countries in the region.

One intention for the telco's IPO, then, must be to extend the reach of the Telecom Cambodia network and broaden the range of services available in the country. That will not happen right away, however, because a September 2009 target for launching the new Cambodian bourse has passed without construction of the planned stock market building getting underway.

Jason Szep of Reuters, writing on Sunday, reports that the global financial crisis intervened to delay the Cambodian Government's plans, ending an unprecedented boom which had seen the country's economy expand 10% annually in the five years up to 2008. Foreign investment collapsed, writes Szep, with tourist arrivals falling by double digits and garment exports, a mainstay of the economy, shrinking by 15%. Now, officials seem confident that these difficulties will soon have abated sufficiently for the bourse construction project to get back on track. "We want to do it next year," Mey Vann, director of the financial industry department at Cambodia's Ministry of Economy and Finance, said in an interview. "It'll be good timing for us with the economic recovery."

Plans for the new stock exchange seem to be quite modest. As Szep reports, the exchange expects to start small with just four or five companies issuing about USD 10 million worth of shares each. Contrast this with the experience of neighbouring Vietnam, whose first stock market launched in 2000 with an initial market capitalisation of USD 43 million, according to Szep. From tiny acorns, reasonably large oaks can grow, however. Perhaps the Cambodian Government will take some encouragement from the fact that today, Vietnam's market is worth USD 27 billion.

Yet, writes Szep, there are risks to Cambodian investors - "in Vietnam, most of the investors were local, often unaware of the risks, and many were burned as the market steered a rollercoaster course. Meanwhile, foreign investors largely sought to dip into the potential high returns of an emerging frontier market while hedging their bets with a highly diversified portfolio."

As in Vietnam, Szep continues, Cambodia is giving state companies priority with a place to sell stock. However, the reaction from inside the companies set to be privatised is not universally positive.

"We don't have any financial constraints. I don't understand the reasons we are going to be listed," said Ek Sonn Chan, who runs the Phnom Penh Water Supply Authority, which employs about 600 people, has about USD 200 million in assets and generates about USD 25 million in annual revenue. He said the company is profitable."If we become a public company, maybe we are more responsible, more transparent and maybe we can help the government allocate financial support to our company. But in the meantime, we don't know much about how it happens. It's very new to Cambodia, very new to me," he said.

I am not aware of any views - positive or negative - being expressed by the current management of Telecom Cambodia about next year's IPO. As Jason Szep writes, though, there does exist the view that the timing of the planned launch of the country's bourse may not be right for some time. Foreign direct investment nearly halved to an estimated USD 490 million from USD 815 million in 2008, writes Szep, who also reports that the International Monetary Fund expects Cambodia's economy to shrink nearly 3% this year before growing about 4% next year.

It seems that it will be in 2010, then, that we should watch for signs of Cambodia's fixed telephony and Internet segments beginning to enjoy the early stages of new growth. Whether this will ever be anything like as impressive as the growth of mobile services remains to be seen. I certainly doubt that the wireline space will, in the near future, be contested by anything like as many players as the mobile market, which, as I've stated here numerous times, has no fewer than nine cellcos jockeying for position. Again, let me take the opportunity to opine that while a good number of MNOs competing on price and innovation are needed to drive the growth of any cellular market, Cambodia seems to be a place were the level of competition may actually be excessive. I've repeated here (almost ad nauseum for regular readers, perhaps) that the aggressive pricing by the likes of Metfone and Vimpelcom-backed Beeline Cambodia has been cited as the reason for global emerging markets player Millicom International Cellular quitting the country.

Another matter given a fair amount of space here has been the fact that the first of those two disruptive later market entrants is backed by a company owned by the military establishment of Vietnam. At risk of excessive repetition, I'll say again that an army-owned cellco from a communist, centrally planned economy is surely not under the same kind of obligations to return profits for shareholders as is the case for its competitors. This affords the operator the possibility of building a mission around extending the availability of services to more remote regions and less affluent people, as Viettel-owned Metfone seems to have done in Cambodia.

Perhaps encouraged by how successful this has been, Viettel is now reportedly keen to buy a stake in Teletalk, a state-ownd GSM operator in Bangladesh, according to a recent Cellular News article.

Teletalk has not carved out a significant chunk of the Bangladesh mobile market. According to WCIS, it is currently estimated to own just 2.31% of the country's 48.7 million subscriptions. However, with mobile penetration at under 30% in the densely populated south Asian country, a nice growth opportunity may exist for any company acquiring the public sector MNO and somehow improving its performance. If Viettel prevails in its bid and is similarly successful in growing the customer base through the application of the same low-price approach used in Cambodia, perhaps a major shake up will affect the Bangladeshi market, where change of some kind has seemingly been on the cards for a while.

Back in July, in an article which was mainly focused on Millicom's exit from Cambodia and two other Asian Markets, I also mentioned that Aktel (an Axiata/NTT DoCoMo joint venture) was rumoured to be in merger talks with Orascom Telecom-backed Banglalink, whose CEO Ahmed Abou Doma had explained in a statement that apart from market-leading Grameenphone "others are continually posting losses" and that "in order to sustain in this fiercely competitive market, and in line with [Orascom's] growth ambitions", his company was "considering many strategies of which consolidation is an option."

Here, then, we have another market in which the room for growth implied by quite low mobile penetration (29.58% in Bangladesh) does not necessarily mean that a licence to operate a mobile network is also the proverbial licence to print money. If Viettel's bid is successful and if the Cambodian example is instructive, perhaps the likes of Mr Doma at Banglalink are about to find that things are about to get even tougher.

So, the Vietnamese army may be set to march into another market and inflict damage on more private sector telecoms operators.

This meandering article will conclude with the observation that Southeast Asia is not the only battle zone for military men with an eye on the telecoms market.

Another is at the western edge of Asia, where, in Iran, the state-owned incumbent fixed-line telecoms operator, TCI has been the subject of a fairly exotic form of 'privatisation'. A 51% stake in the company has been acquired by a consortium controlled by the Islamic Republic's Revolutionary Guards, a move which, according to the Guardian newspaper, is "fuelling suspicions that the organisation is quietly staging a military takeover." The Guardian article also mentions claims that a rival enterprise had been unfairly excluded from the bidding process because it lacked appropriate "security qualifications".

Also reported are warnings from critics who worry that the deal "exposes ordinary people, especially political activists, to intensified spying and electronic surveillance." The article goes on to report that this news came days after the governor of Iran's central bank, Mahmoud Bahmani, announced that a finance company owned by the Revolutionary Guards, the Ansar Institute, had been cleared to become a fully fledged bank.

The Revolutionary Guards, formed in 1979 to safeguard the Islamic revolution, writes the Guardian's Robert Tait, have built a financial empire with interests including oil and gas fields, airports and eye and dental clinics during the presidency of Mahmoud Ahmadinejad, himself a former member. Tait writes that this "empire" has been awarded lucrative building and engineering contracts "and is thought to control the smuggling of contraband into Iran."

The telecoms takeover, reports Tait, has provoked accusations that the Government's privatisation programme – required under Iran's constitution – is a sham designed to sell state assets to the Revolutionary Guards.

Journalist Mohammad Nourizad has warned that the Guards' control of TCI would be used to step up monitoring of the Government's opponents, Tait reports.

"Getting access to telecommunications management has always been vital for the security requirements of the Revolutionary Guards and the iron men behind the scenes," Nourizad wrote in a blog. "It means control over the country's entire telecommunications system, including landline telephones, mobiles, text messages, the internet and any other stuff linked to telecommunications. After that, it's a piece of cake … to trace people."

Scary stuff, if true.

At ease. Dis-MISS.

Quick march! Military men storm the telecoms sector

Opportunities and challenges for mobile players in Iraq and Libya

A number of telecoms news services this week picked up a story from Waleed Ibrahim of Reuters, who writes that Iraq's Finance Minister Bayan Jabor has announced the approval of two new mobile phone licenses for auction soon, one of them for a 3G network.

So, which telecoms groups might fancy setting up shop in what is the world's sixth most unstable country according to the 2009 Failed States Index produced by Foreign Policy magazine and the Fund for Peace?

A Cellular News piece, reporting the same item, states that Etisalat and Turkcell would be interested in bidding for a mobile license in the country. The Turkish cellco certainly seems to have a taste for adventure, having established an operation in Belarus, a country which under the leadership of President Alexander Lukashenko has been barred since 1997 from membership of the Council of Europe for election irregularities, and which has also attracted criticism for its record on human rights and freedom of the media.

Turkcell, then, is not shy of a challenging environment, something which is also evidenced by the operator's thwarted attempt to enter the Iranian market in 2004-2005. Earlier this month, DevelopingTelecomsWatch visited the issue of whether involvement in the Iranian market - and in the Syrian market - could derail South African telco MTN's mooted merger with giant Indian cellco Bharti Airtel. This is because banks involved in the transaction might fall foul of restrictions on dealing with these two countries which are set by the U.S. Treasury's Office of Foreign Assets Control (OFAC).

One country which might have proved problematic in these terms until quite recently is Libya. Now, however, relations between the USA and the North African country have improved to the point where such concerns should not be an obstacle to companies seeking to invest in Libya - and it seems Turkcell are keen to take advantage of this improved investment climate. According to a recent TelecomPaper story, the operator plans to bid for a licence to provide fixed and mobile phone services in Libya, announcing that the country's stable economy and per-capita income indicates the domestic telecoms market has high growth potential.

In February, the Global Mobile Daily service from Informa Telecoms & Media reported on the availability of this new licence, noting that the General Telecommunication Authority (GTA) of Libya had launched an international tender for a mobile and fixed-line concession in the country. As this report indicated, the Libyan telcoms market is currently monopolised by state-owned incumbent fixed-line operator General Posts and Telecommunications Company (GPTC), which owns 100% of mobile operators Libyana and Al-Madar. According to the GMD report, the GTA hopes the entrance of a new player will stimulate the country's telecoms market. That said, the status quo does not seem to have discouraged Libyans from embracing mobile technology and it should be stressed that the country is not under-penetrated. According to the World Cellular Information Service, Libya's mobile penetration rate is currently a hefty 141.58%. I am therefore a little uncertain what Turkcell might mean when it refers to the country's high growth potential. Perhaps the relatively low take-up of 3G services to date offers a nice opportunity. Or perhaps Turkcell is most excited about the chance to challenge the incumbent telco in the fixed-line voice and broadband space.

The Iraqi mobile market would appear to offer a lot more room for growth for Turkcell and any other companies keen to pick up one of the two new licences. Mobile penetration there stands at 67.47% according to WCIS.

However, aside from the general instability of the country mentioned at the top of this article, Iraq offers a challenging environment for mobile operators in some other ways. The imposition of fines by the authorities, for example, seems to happen on a fairly regular basis. Global Mobile Daily reported on 28th May that all three of the country's mobile operators had been fined for poor service, with Zain Iraq, facing the heftiest fine (USD 18.6 million) and Asiacell and Korek Telecom each being fined a little more than USD 1 million. The report notes that this is not the first such penalty for Zain, which had previously been fined USD 9 million.

This, however, does not appear to have prompted Zain to consider withdrawing from Iraq. A Reuters article last month quotes the group's CEO Saad al Barrak as saying the company will continue to operate in Iraq: "It's not a crisis at all. It's normal... to get some penalties here and there," Barrak said. According to Zain, the poor quality of service which caused the imposition of the fine is due to jamming by U.S. forces trying to prevent insurgents from setting off bombs.

Asked by Reuters whether Zain planned to halt its operations in Iraq in response to the fine, Barrak replied: "never."

This is not to suggest, however, that we can expect Zain Iraq's management to accept Government criticism and intervention in meek silence. A week before his group CEO's comments, Ali al-Dahwi, who heads up the operation in Iraq, used strong language to protest how his company is treated by the Iraqi authorities. "We kept our mouths shut for a long, long time from speaking the truth because this has something to do with the safety of the Iraqi people. One hundred percent we are sure (it is) interference and jamming," he told Reuters.

Dahwi said Zain Iraq tried to talk to the Government to explain why the service was suffering but met "deaf ears." He claims that the decision to impose the fine was based on "hearsay," rather than scientific proof. "The more we played Mr. Nice Guy, the more we were abused," he said. "It seems to me there are many members of this government who talk the talk about encouraging investment but when it comes to walking the walk, the only thing they care about is their political position, not Iraq, how to get reelected."

Iraq, then, is a market not without challenges for those courageous enough to invest there. I will be interested to see if Turkcell, a company I've followed closely for some time, will indeed make this move - and make the move into Libya, where it's less obvious to me that there is good room for growth.

Opportunities and challenges for mobile players in Iraq and Libya

Double A Side: Zain Africa Speculation Watch: Episode 8 + Iran 3rd Mobile Licence Saga Update

Vivendi's Lévy: no comment on Zain Africa rumours
Picture: ⓒ 2008 The IBTimes Company

Intrepid reporters from Reuters can often be relied upon to grab telecoms big hitters on the sidelines of conferences and other events. Reuters people seem to be well trained in the dark art of thrusting a mic at the luminaries and bagging a headline-worthy quote.

Last month, for example, the ambitions of Russian cellco MTS were revealed to a Reuters scribe on the sidelines of the of the St Petersburg Economic Forum.

This week, however, the news service has done quite so well. A Reuters reporter sprang on Jean-Bernard Lévy, Chairman of French media and telecoms conglomerate Vivendi, who was present yesterday at a forum in Aix-en-Provence, France. Regular readers of this blog, particularly those gripped by the drama of Zain Africa Speculation Watch the mini-series should be able to guess which question was asked. The answer? Not too illuminating.

Levy declined on Saturday to say whether his company is interested in acquiring the African operations of Kuwaiti telecoms group Zain. "I have no comment to make on this," was Lévy's reply.

So we are none the wiser - unless you're the kind of conspiracy theorist who infers something significant from such a minimal response.

I was one of those for whom the notion of Zain selling its African operations popped up out of nowhere. I remembered colleagues returning from a pan-African telecoms sector conference and reporting that Chris Gabriel, CEO of Zain's African unit had spoken in terms of having a war chest for further acquisitions. Much had also been made of Zain's stated ambition of being a major global player and of the strategic important of Africa in that context.

Zain Africa Speculation Watch kicked off on on 12th June, almost as soon as I had started to hear rumours. Another reason this was all rather surprising was that only days before that, there had been suggestions that Zain might be looking to acquire a significant asset on the African continent -France Telecom's stake in market-leading Egyptian cellco Mobinil. Readers interested in that part of the world cannot have failed to notice the long wrangle that has gone on between France Telecom and the other major shareholder in Mobinil, Orascom Telecom, itself a Cairo-headquartered company.

This tussle seems to have been initiated when the two sides found themselves at variance over strategy for Mobinil. According to Alastair Sharp, the Egyptians were keen to invest more heavily than the French wished to, disagreeing over Mobinil's budget and expenditure, marketing strategy and start up of 3G services. Since kicking off in April, this has become quite a heated business, with famously outspoken Orascom Telecom Chairman Naguib Sawiris accusing France Telecom of being "in the business of value destruction".

Sneaking onto the end of today's musings - by virtue of being Zain-related - is the matter of Iran's third national mobile licence. In common with Zain Africa Speculation Watch and the Sawiris-France Telecom battle, this is another fairly long-running story to which it is probably not unfair to apply the label 'saga'.

The saga started with the UAE's Etisalat and local partners winning the valuable Iranian concession, which comes with a useful period of exlusivity regarding the provision of 3G services. This later went sour and by mid-May, I was noting here that Zain appeared to be waiting in the wings to pick up the licence and get into the large, growing and still helpfully under-penetrated Iranian mobile market.

This is now looking unlikely.

On Friday, TeleGeography was picking up reports from an Iranian newspaper which indicated that a new tender will be held to find a strategic investor to launch the country’s third national mobile network. Iran’s telecoms minister Mohammad Soleimani was quoted as saying that Zain had been offered the third operating licence in May, but had "not fulfilled obligations".

A Cellular News take on the same story talks in terms of confusion about whether Zain had not only been "offered" this licence but had also actually secured it, mentioning reports from mid-May about the Kuwaiti company having been "awarded" the concession.

The article continues, however, by noting that Zain said it had only been invited to renew its negotiations as the leader of the consortium that came second in the original bid process. As the article states, "if Zain was formally awarded the license, then it has kept very quiet about it."

For seasoned Iran watchers, this is all a bit déjà vu. As the Cellular News piece reminds us, there was also controversy over the country's second national mobile licence. This had been snapped up by a company 51% owned by Turkcell in 2004, but the deal fell foul of a clamp down on foreign investments by conservative forces in Iran. The Turkish cellco was accused of having links with Israel - clearly a complete no-no. After a year of wrangling, the licence was reissued to South Africa's MTN, which was happy with a minority stake in the new operator.

Two sagas, then, that I enjoying watching. Happily, a little news about both was breaking at around the same time. Hence this Double A Side update from DTW.

Double A Side? Use of that term betrays the fact that I'm old enough to have been brought up on vinyl. Having turned over a chunk of Sunday to writing this, perhaps I'll slap something mellow on the turntable and just leave the sagas to one side for now.

Double A Side: Zain Africa Speculation Watch: Episode 8 + Iran 3rd Mobile Licence Saga Update

MTN-Bharti deal - What are the potential obstacles?

MTN Irancell: does the South African group's presence in U.S.-sanctioned countries threaten the mooted merger with Bharti Airtel of India?

By some measure the the most durable story in these parts is playing out in the dramatic form of Zain Africa Speculation Watch the mini-series. I just can't leave it alone.

It is by no means the only show in town, however. Also quite compelling is the merger being considered by Indian cellco Bharti Airtel and pan-African mobile group MTN. However the talks are progressing, it seems that the former party will not find it too challenging to raise the necessary cash. If a recent headline in India's Economic Times is to be believed, several banks are in "a race" to offer part of the USD 4 billion apparently needed to fund the merger. Writing on Monday, Mohit Bhalla believes that JP Morgan, BNP Paribas, HSBC and Barclays are all keen to do business.

According to a Reuters article on Tuesday, however, some financial institutions may find one aspect of the mooted merger to be something of a challenge.

It seems that while a big Q1 jump in subscriber numbers for MTN Irancell (in which MTN holds a 49% stake) is good news for the pan-MEA group, the company's involvement in Iran is "potentially troublesome for U.S. banks eyeing a role in the South African telco's planned USD 20 billion-plus merger."

The Reuters article notes that MTN's annual report says 13% of its 2008 revenues came from Iran, Sudan and Syria, three states where the U.S. Treasury's Office of Foreign Assets Control (OFAC) "sets tough restrictions on U.S. firms, effectively banning them from most direct and indirect dealings due to U.S. sanctions."

While these markets are important for MTN, they can be challenging places to do business. In Iran, for example, some reports have suggested that MTN Irancell's revenues may have been quite badly affected by recent Government action in the wake of the disputed election result and ensuing unrest. A week-old Economic Times article cites unnamed analysts as suggesting that MTN "stood to lose at least a month's revenue in Iran" due to "blockage of mobile network signals in the wake of the ongoing strife there."

This suggestion was rubbished by MTN's group spokeswoman Nozipho January-Bardill according to Reuters. One week ago Ms. January-Bardill stated that the "MTN network is running in Iran and there is nothing wrong with it."

This comment about about MTN's network being unaffected notwithstanding, I do have the sense that to some degree it continues to be difficult for Iranians to communicate with associates within and beyond their country. I can offer one personal anecdote.

A Dubai-based Iranian contact of mine is currently visiting his home country and has advised me that he expects communication to be affected during his stay. He says that I may not be able to connect with his UAE mobile phone and that email communication could be affected if he experiences difficulties with Internet access.

The latter problem could certainly arise, if a recent Wall Street Journal article is to be believed. The WSJ piece contends that Government "infiltration of Iranian online traffic could explain why the government has allowed the Internet to continue to function - and also why it has been running at such slow speeds in the days since the results of the presidential vote spurred unrest." By way of evidence, the article states that "users in the country report the Internet having slowed to less than a tenth of normal speeds", explaining that "deep packet inspection delays the transmission of online data unless it is offset by a huge increase in processing power, according to Internet experts."

According to the Economic Times, MTN has declined to say anything negative about the current situation in Iran. The Indian newspaper also canvassed the views of analysts, whose collective feeling seems to be that MTN is "expected to continue its silent approach." Frost & Sullivan's Lindsey McDonald is quoted as saying that "MTN will want to keep the Government happy since Iran is one of its biggest markets, and they would rather lose market share than be kicked out altogether."

"That's the company's style," agrees Dennis Smit, Managing Director of South African research house BMI-T. "It doesn't get involved in local politics," he said. "That's why it can enter such high-risk countries."

In the sense of these countries being too high-risk for U.S. banks eyeing the MTN-Bharti Airtel merger, opinion seems to be divided.

Tuesday's Reuters article mentions that a U.S. Treasury official had "declined to comment on the MTN-Bharti advisory work by U.S. banks, but said there was some room within OFAC rules for U.S. companies to deal cautiously with situations involving deals with foreign firms that have subsidiaries in the sanctioned areas - as long as they are not facilitating transactions with the sanctioned countries."

"U.S. persons are not necessarily prohibited from dealing with third-country firms that do business in sanctioned countries, although they should approach such dealings carefully," said the official, who was not authorised to speak publicly about OFAC's enforcement of sanctions.

The Reuters article indicates that for investment banks with advisory or underwriting fees at stake, that interpretation has created two schools of thought. The first is a more liberal view of the sanctions, "which appear to have some wiggle-room" with regard to deals that are 'third-country' as opposed to dealing directly with a company whose headquarters are in a sanctioned country. The second view is more conservative and might lead to bankers and lawyers steering clear of a Bharti-MTN type deal "on the premise that facilitating such a transaction toes too close to OFAC, even though the merger indirectly involves the sanctioned areas."

It remains to be seen which view will prevail in this case and to what extent a cautious approach by U.S. banks could negatively affect the chances of the merger going ahead.

In South Africa, where MTN is headquartered, there also seems to be some divergence of views about the desirability of the group linking up with the giant Indian cellco.

One suggestion is that this week's resignation by MTN Finance Director Rob Nisbet may have resulted from his not favouring the proposed tie-up with Bharti Airtel.

A former rival of MTN's, however, seems to be feeling much more positive, according to another recent Economic Times article. Former Vodacom CEO Alan Knott-Craig told the newspaper that "the deal will create a lot of value for the shareholders of both the companies" and that "it is the best time for Bharti to do the deal." According to Knott-Craig, "three years ago, Bharti would not have brought anything to the table [but] that story is now different. The deal will allow Bharti and MTN to learn from each other." A nice endorsement.

The exclusivity agreement currently locking Bharti Airtel and MTN out of discussions with other prospective bedfellows expires at the end of this month. With Zain's African operations possibly on sale (see DTW posts passim) and possibly of interest to either of these two parties, I have to assume that this mooted mega-merger will play out one way or another before too long. Keep watching.

MTN-Bharti deal - What are the potential obstacles?

More snags for strategic investors eyeing Iran

I was saying only yesterday that telcos looking to invest in the Islamic Republic of Iran have faced some daunting problems. This came up in a brief discussion of Etisalat's stalled attempt to grab the country's third national mobile licence, as well as the problems Turkcell faced when trying to get hold of the second licence a few years ago.

I also mentioned that last year I hosted a conference at which Russian cello MegaFon signalled its interest in the third licence.

At that same conference, the Iranian delegation in attendance were talking up the attractiveness not only of the GSM/UMTS concession but also of two other investment opportunities - the sale of WiMAX-suitable spectrum and the part privatisation of the country's national incumbent wireline operator, TCI. One party interested in the latter opportunity now seems to have hit snags of its own, according to to TelecomPaper.

Telekomunikasi Indonesia, says the article, had announced in January that it planned to form a consortium with unnamed Iranian Government agencies to purchase a 20% stake in TCI. The article cites reports from the Jakarta Globe, whose journalist has been told by Telkom Vice President Heri Supriadi that the deal will not go ahead until "political hurdles" are cleared.

The TelecomPaper article suggests that one of these hurdles would be the matter of Telkom's US shareholders, which include pension funds, being forced to sell their holdings because of the US sanctions against Iran.

More snags for strategic investors eyeing Iran

Iran: Zain poised to take advantage of Etisalat's troubles?

Many people who visit this blog regularly will probably have been following the saga of Iran's third national mobile licence. This is something I've personally tracked for some time. Without claiming any particular expertise or any direct involvement in the various twists and turns, at times I've been just about close enough to some of the interested parties to maintain an interest.

In 2008 I hosted a conference in Moscow. The Deputy CEO of Russian cello MegaFon, Sergei Soldatenkov, was among the speakers and did not seem to be in stealth mode when firing questions to a speaker from an Iranian delegation, which was on hand to raise the visibility of the third mobile licence auction and other investment opportunities in their country's telecoms sector.

At other times, I've had reason to spend time in Istanbul. So Turkcell is a company which I find myself watching with interest. The market-leading Turkish cellco had to go legal after a painful, untimately unsuccessful attempt to secure Iran's the second national mobile licence. South Africa's MTN eventually took advantage of Turkcell's rebuttal by the Iranian Government.

A foothold in the Iranian market does, on one hand, look like a rather rich prize for courageous strategic investors in the telecoms space. The latest mobile penetration figure from WCIS is just 72.02%, which is low for a country with a well-educated, youthful and growing population. Moreover, the third national mobile licence comes with a useful two-year exclusivity period with regard to the provision of 3G services. On the other hand, the Islamic Republic is not a market in which a foreign telco can establish full ownership of an operation. Local investors are required by law, with the non-Iranian party limited to a 49% stake in a telco.

Etisalat weighed all of this up and decided to proceed with what turned out to be a winning bid.

Many of you, however, will be aware that this deal now appears to have gone sour. This is due to different problems to those encountered by Turkcell a few years ago. Complications around getting into Iran, however, do seem to be something of a recurrent theme.

I've received news updates about the stalled Etisalat deal almost daily for around a week now. The most recent one came yesterday from Cellular News, whose article reports the UAE-based telecoms group is in talks with Iran’s telecoms regulatory agency in an effort to retain the recently acquired licence. As the article reminds us, the regulator earlier withdrew the 2G and 3G concession which was awarded in January, claiming that Etisalat failed "to give necessary guarantees and licence fees on time".

Quoted in the article, Mohammed Omran, CEO of Etisalat, is keen to assert that "The Iranian regulator did not strip Etisalat of the country’s third mobile licence; but disagreement with its local partner may have cost the company the licence. The local partner that controls the consortium that was awarded the licence wanted to change the terms of the deal, which put it at odds with the Iranian regulator."

The Cellular News piece indicates that Zain may be waiting in the wings in anticipation of Etisalat not being able to turn this around. Zain are reported to have stated that the asking price may be too high considering the current economic climate. The Iranian Government, however, may be unimpressed by any attempt to cite economic woes as justification for a significantly lower bid. According to Cellular News, a spokesman for the Iranian regulator has stated that "the price proposed by Zain should not differ by more than 5% from Etisalat’s proposition."

Iran: Zain poised to take advantage of Etisalat's troubles?